Seasonally-adjusted jobless claims way down but…

On the surface this week’s jobless claims data look very good. Initial claims came in at 522,000, the best since the first week of the year and pulling the 4-week average below 600,000 for the first time in about six months. Moreover, there was a huge dip in continuing claims to 6.27 million, down from the upwardly revised figure of 6.91 million. And the year-over-year trends continue their steady march downward. This is the best weekly data on seasonally-adjusted figures we have seen in months. It’s all good, right?

Not exactly. Further examination reveals a more mixed scenario. The unadjusted data were not nearly as favorable. This is in large part because of changes in summer auto production schedules. We will have to wait and see if this data is confirmed over the coming weeks.

I have circled the latest unadjusted data points. And you should notice that both initial claims and continuing claims rose. In fact, initial claims for unemployment insurance rose by a very substantial 86,000. So, before you pass the Courvoisier to celebrate economic recovery, let’s allow a few more weeks of data to confirm the large downward trend of the last two weeks of seasonally-adjusted initial claims. After all, initial claims are still well north of 500K.

I should point out that the declining trend in year-over-year comparisons of the unadjusted data continues unabated. Therefore, as I indicated last week, I would characterize this as a weak employment market. However, the trend in unemployment claims in the United States is clearly down. Since, this downward movement is still slow, expect a weaker jobless recovery in which the unemployment rate continues to rise into double digits.

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.